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tv   World Business  WHUT  September 7, 2010 6:00pm-6:30pm EDT

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>>it's now the world's second largest economy, but is home to few well known brands. so why do chinese companies still lack international recognition >>we hit the road in the sham, the new domestic car shaking up the auto sector in syria >>the market is expanding and this is good and we think we still have margins for more expansion >>and could stockbrokers become a thing of the past? we look at the rise of completely automated trading. >>now it's almost like the movie terminator, you've got a lot of machines in a room and they're making trading decisions, >> abirached: hello and welcome. i'm raya abirached and this is world
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business, your weekly insightinto the global business trends shaping our lives. china has just overtaken japan to become the world's second largest economy and is still growing at a blistering rate. but few chinese brands are well known internationally and domestic consumers aspire to foreign products. however that could be starting to change. >>reporter: the factory floor at one of china's best known clothing companies that few abroad have ever heard of. >>reporter: inner mongolia's erdos cashmere is 30 years old. powered by a huge ad spend over the years, it commands 40 percent of the domestic soft woollens market. >>reporter: but this sector, with its safe and comfortable image, is under pressure from the influxof aspirational, edgy, foreign fashion brands. so erdos is on a mission, not just to create new lines, but to revamp its entire corporate image. >>zhang: we can make
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the changes to our products but our biggest hurdle is to make sure this product now is able to be sold at the right place where you can meet the right kind of consumer, so i think this project is probably the biggest hurdle we are overcoming. >>reporter: the project is branding, creating a clear, credible, emotional and motivational personality that differentiates a company from its competitors. the erdos overhaul, from visual identity, to store image and product range - is a huge undertaking as the company seeks international-style street-cred as a fashion house. >>nick mackie: for years, companies had a command economy mindset: produce big slogans, spend huge sums on tv advertising and expect consumers to believe them. but dogged with quality and copycat problems, few firms have succeeded in developing the all-important intangible, emotional attachment to their products
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and services, at home and especially abroad. >>reporter: consumer research firm millwardbrown, however, says corporate attitudes are now clearlychanging - that pressure from abroad is forcing boardrooms to be more sophisticated. >>spencer: in the last few years especially, in the internal and domestic marketplace, competition has grown - a lot of multinational brands are starting to exploit distribution channels and move into lower tier cities. so as competition increases in china, it's more and more important for productsand services to be able to differentiate themselves. >>reporter: that said, the chinese government still fails to adequately protect firms from well connected counterfeiters, and this seriously undermines a good brand. and even the more progressive chinese companies are burdened with the "made in china" stereotype: low paid factory workers, shoddy goods and poor environmental standards. an accusation that for many simply isn't fair. but it is a market reality, especially abroad, notably in countries with a critical,
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unforgiving press. >>spencer: some countries, this hurdle might be more difficult to overcome than others. so, this might be the case in the us where the pet food scandals, the melamine scandals certainly generated very, very high attention in the press and in the media. >>reporter: the reality of the "made in china" curse isn't lost on aigo, a popular maker of usb memory sticks, mp6 players and digital cameras. as an olympics and formula one sponsor, aigo enjoys a high profile in mainland china. but its chairman accepts that to be credible, globally, the bar for chinese companies is high, and so, until aigo has a strong overseas service network, he's holding-off on expanding abroad. >>feng: many, many companies want to sell products fast, but no service! it's a disaster for brands. because only if you have good service, you can give satisfaction to the consumer.
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so we need a partner. >>reporter: chinese exporters like white goods maker haier and beer maker tsingtao are strongly focused on service and brand awareness. that's why they're on the short list of chinese companies that foreigners might recognise. other players have raised their profiles by making big ticket acquisitions - like lenovo which bought ibm's think pad and now geely which recently purchased volvo. >>spencer: there's a logic to that, that seems to be: can we appropriate marketing sophistication; or can we appropriate an existing relationship with consumers in another market. >>reporter: but as the best connected chinese brands develop and expand internationally they will lose a protective umbrella that has served them well: the power to often stifle online criticism. in china, a whole industry has developed to erase unflattering comments. but the culture is very different on the otherside of the great firewall. >>the head of branding at one
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of india's leading corporations, infosys, says scrutiny is now unrelenting. brands that cover-up or don't keep their word, do so at their peril. >>nath jha: you remember that sting song: every breath you take, every move you make, every smile you fake, i'll be watching you, every company is being watched by all its stakeholders. and every misstep you make will be caught. it's the end of command and control communications. >>reporter: and this is corporate china's achilles heel. for companies must be loyal to the state, or, indeed, they may be state controlled. and among consumers in the wealthier markets, the chinese government is largely unloved, so much so,that a re-branding of the communist party itself, could well be good for business. >> abirached: over the last decade liberalization has made syria a much more open market
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and the country is richer as a result. hoping to capitalize on this and a growing demand for cars, the government has launched its own domestic model called "the sham". but are the syrians buying it? >>reporter: syria's first car is a sham. its name, which admittedly sounds somewhat dubious to english speakers, is derived from the old arabic word for greater syria. the project is a joint venture between the giant iranian car company khodro, the syrian government and a private business, al sultan. called siamco the company has spent around sixty million dollars putting the sham on the road. >>ghisn: the government's idea was that this factory would be the first step in establishing a specialized industry for manufacturing cars. the first stage was assembling and then the industry would move into producing some of the car parts and finally, we will give our own car manufacturing industry a boost. >>reporter: at the present all the car's components are still
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manufactured in iran, and are then assembled and painted by local workers in syria. the plant employs 330 people and currently only produces a maximum of 40 cars a day -although there are plans to increase that. >>al naameh: i hope we can increase our production more and we can have more models introduced by siamco and also we would like to have more than one shift and that would help us create more job opportunities because it is one of our targets for industry also. >>reporter: at the moment the car is available in both 1600 and 1800 cc versions. it's a family carwith basic features such as power steering, air conditioning, central locking, electric windows andan on board computer that alerts you to such things as whether the oil needs to be changed. the next model, if the company can secure the financing, will be more advanced. >>al naameh: i hope that we can do this new model, as i told you, with an automatic gearbox, with abs for example, aluminium wheels with front and rear new
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panels, a new dashboard and with a new morepowerful engine. >>mars: despite its somewhat ambiguous name the sham is no illusion. there are more than 11,000 of the cars now driving on syria's road. it's a drop in the ocean compared to the 700,000 produced eachyear by the parent company back in iran but the fact that these cars are actually being produced insyria is a source of national pride. >>reporter: mahmoud tomah has been working at the plant since the company started. >>i am very proud, not a little, because it is a new production in syria and i think it gives a place to syria in the world. >>reporter: and that feeling of pride is one of the reasons syrians are buying the car, as it demonstrates the country has developed to a level where domestic car production is viable. we caught up with local businessman abdul hamid in a sham show room just outside damascus >>hamid: i decided to buy the sham car because it is well manufactured. it's a comfortable car witha nice design. and it's a car that was produced in my country. i had to buy it and
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i encourage every other syrian citizen to buy the sham car as it supports our country's economy and our national production. >>reporter: there is now another joint syrian- iranian car company operating, saipa, in the countryalthough some people question why syria is in the business of producing cars in the first place. >>husrieh: there is no use assembling cars while you can not be competitive in the international car market. it is not about import substitution any more it is about specialising and focussing on areas where we have competitive advantage. >>reporter: indeed by international standards the car is not cheap at around twelve thousand dollars, but it is locally competitive when import costs and registration duties for foreign brands are taken into account. a toyota prius costs an eye watering 60,000 dollars here, more than double the price in the us.
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>>reporter: but after five year of economic liberalisation the country's middle and upper classes are growing larger and richer. it helps too that there are now private banks prepared to provide carsloans. >>husrieh: no one would believe what happened in the car sector, in retail, could be achievable without private banks. >>shallah: it's definitely very important because the car business is linked to all different sectors, if the economy is liberalising this implies that new companies are established which is paying more salaries, increasing the purchasing power. companies are buying more cars for their fleet so overall the more the liberalisation the better the opportunities we have. >>reporter: that said the overall size of the country's car market is still extremely small with nomore than seventy thousand cars being sold each year. >>badr: we have almost one million seven hundred thousand vehicles in syria, among them half million are passenger cars so the market is expanding and this is good
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and we think we still have margins for more expansion because until now the vehicle ownership in syria is not more than eighty cars forone thousand inhabitants which is a very low rate of vehicle ownership. >>reporter: which, to the 180 car companies who attended the country's 10th annual motor show, means there's plenty of room for growth. although despite the fact that you don't have to pay for the sham's registration - which will save you thousands of dollars - most syrians prefer korean cars such as kias - which now make up some 70% of the market. >>hawasli: in arabic the reason for our popularity is... our cars are of good quality and the prices are reasonable. >>reporter: it's perhaps difficult to get excited about a company that has only produced eleven thousand cars but when it comes to the sham maybe that's missing the point. it was the first car produced in syria. and that matters to them.
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and as long as the syrian economy continues to grow, and thisyear gdp is expected to increase by five per cent, the road ahead for the sham seems clear. >> abirached: still to come on world business... >>the brave new world of automated trading, where speed is king. >>when we are talking about high frequency traders we are talking milliseconds. >>and rugby heads to the beach to attract a new generation of players. >>sand and scrums... and the rest in just a moment on world business... >> abirached: since stocks and shares began to be traded, markets have fluctuated, sometimes wildlyas confidence and panic swell, than crash prices. the reason for this
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of course is that even traders are often irrational and emotional. but increasingly stock trades are being handled not by people,but by machines and it's a trend that looks set to grow. >>reporter: once, trading floors looked like this. but in the 80s computers swept most of the old bear pits away, today the bulk of trading is carried out by deskbound brokers. even this could soon change as more trading becomes entirely computer controlled. >>misra: if we go back to the floor trading days where we had lots of individuals on the floor reacting to market movements, now it's almost like the movie terminator, you've got a lot of machines ina room and they're making trading decisions. >>one example is hft or high frequency trading, in itself not that new, but huge leaps forward in technology coupled with market deregulation have made this form of automated trading massive.
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>>todd: high frequency trading has been around at one level for a long time, it's just the frequency and the size of it has increased dramatically and that is an advent of the way technology has advanced. >>reporter: technology that runs increasingly complex mathematical programmes, which automatically search markets worldwide for minute changes in share prices and carry out transactions at an unbelievable rate. >>todd: when we are talking about high frequency traders we are talking milliseconds. >>misra: you have got systems like chi-x where you are actually seeing on average 600 microseconds. >>reporter: that's fast. far faster than humans could even process the price information. as a result the sheer number of trades has rocketed. in the us only 2% of financial companies are high frequency traders, but they account for nearly 75% of equity trading volume. >>and by dealing in bulk at speed hft companies can make money where sluggish old school traders can't. >>lester: ceo turquoise and director of information
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services, lse shares traditionally were market made either on the telephone or the floors of exchanges in the 1980s, spreads tended to be a lot wider. high frequency trading firms tend to make markets inside those spreads and they can do it in much smaller size and tighten the distance between which you can buy and sell shares at. >>however to do this takes some serious computing power and that takes space, but data centres can be based practically anywhere. nearly an hour's drive from the financial district of london, in a dreary satellite town is ld5 the heart of trading firm equinix's financial operations. >>reporter: for obvious reasons we can't show you the exact location as they take security very seriously indeed. but once past the bulletproof glass, mantrap, air lock and biometric scanners you can, under escort, have access to 16,000 square metres of technical space. >>schwartz: in coming to slough we were able to find a very large facility but also with access to power which is critical to the growth
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of electronic trading but also with close proximity to major telecommunications routes to allow people to connect both to other exchanges and other places around the world. >>reporter: which is vital, because no matter how fast you trade, someone will be competing to trade even faster. by "co locating" in the same building as exchanges and communication hubs milliseconds more can be shaved off transaction times. >>schwartz: at the velocity that many of our customers are trading, at many trades per second, being able to reduce that latency improves their performance, improves their chances of being successfultraders. and so, whereas before people worked very hard to shorten the distance by being in the same city, now it's literally about being in the same room and having, you know the speed of light workat their advantage. >>reporter: that's why some companies have set up multilateral trading facilities or mtfs like turquoise, chi-x and bats
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europe. they've introduced new tech allowing greater interaction between high frequency traders creating, almost, a one stop shop. >>hemsley: previously a trader would have to go to multiple exchanges across europe if they wanted to trade a pan european basket of securities. what the mtfs have offered is the ability to trade paneuropean securities in one place. >>reporter: however this brave new world is not without its problems. in may this year the dow jones plummeted nearly a thousand points in a matter of minutes in a "flash crash". that some argue wascaused by volatility following hft firms pulling out of the market. others believe it was simply a very human reaction. >>carjat: what we have seen recently is that some of the hft might just simply pull out of the market and that can cause an issue, because all of a sudden that liquidity pool that was there all of asudden disappear and significant volatility ensues. >>hemsley: i think that one
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of the biggest problems was there was a lack of certainty about whethera trade that had been executed in the market was going to stand or not. >>reporter: what is certain is that regulation is high on the agenda across the entire financial industry and as a relatively new and rapidly evolving area hft is sure to come under the spotlight. >>misra: there is a high frequency witch hunt as i call it out there at the moment, whether it's the regulators pandering to political sentiment. >>lester: i personally believe there's enough regulation in the equity markets as there is! in terms of high frequency trading, they're a natural force, they... we think add positively to the market,don't exacerbate volatility, and are not there to be regulated out. >>carjat: hfts are generally good for the market liquidity. what they are doing is that essentiallythey are bringing that sort of efficient market theory into a reality. >>reporter: however it is regulated high frequency trading is here to stay and as technology continues
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to develop will no doubt become faster and even more efficient. >>misra: there's been comments out there about "are we going too fast? should we slow systems down in some way?" actually that over turns mores law which means every few years the price of technologyhalves and the capacity doubles. and if we look at technological advancement and human advancement,that flies in the face of that and if we took that approach of just slowing technology down i thinkwe'd all be living in caves again. >>todd: the level of sophistication in algo trading and high frequency trading is going to continueto increase. at one level almost an infinite number of possibilities. and that's what makes the markets, and makes them very, very interesting. >>reporter: and could even make the vilified banker a thing of the past as well. >> abirached: and also technologies are working on new platform that can carry out trades in just over a hundredth of a second,
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which they claim is 20 times faster than any current system. >>this season association football is not as popular in france as it might be after the poor performance and behaviour of the national team at the fifa world cup. hoping to capitalize on this and attract new players into the game, rugby football spent some time touring the beaches of southern franceto introduce youngsters to the sport. >>reporter: are these kids the next generation of rugby stars? maybe... but their coach for the day will settle for far less, hoping these youngsters one day simply join a club. that's the ambition of the french rugby federation or ffr, the body which runs the sport in france. each year it organizes a beach rugby tour along the most popular resorts in southern france - hopingto win over new young recruits. >>llense: the idea is that this gives them a taste for the sport and afterwards
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maybe they will watch a game or even play. the idea is to create a sort of dynamic at least that's what we hope for. >>reporter: the beach rugby tour cost 800,000 dollars to run. a price organizers are happy to pay to help find the players of tomorrow. and of course this summer could be the ideal time to boost the sport's appeal. >>bockman: the people behind the beach rugby tour have three goals: one to make beach rugby look fun; secondly to lure new recruits to the sport and thirdly attract disenchanted football fans to rugby. >>reporter: if of course parents are willing. that shouldn't be too difficult in the case of this young mother, happily watching her son run with the ball in the sand. karine is definitely not a soccer mum and exactly the sort of parent the french rugby authorities are targeting >>in french: at home we do not have a football only a rugby ball. and that's what we play
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with in the garden.... i far prefer the spirit of rugby to football, it's a team sport, and it's about fair play. in fact there are lots of reasons i prefer rugby. >>reporter: after the disastrous performance of the sullen national football team in the recent world cup, where players went on strike and refused to train - spoilt rich footballers are out of favour. rugby is hoping to capitalize by picking up the pieces. >>dullin: i don't know if we will see a surge in new rugby players due to this tour but we will seepositive effects in other ways, seeing people who share the same values as us. in the current tougheconomic times, rugby is a unifier, it's about team respect and sticking together. >>reporter: of course rugby does suffer from an image problem of its own, that's it's a rough and dangerous sport. >>reporter: one of the main goals of the beach rugby promotion is to overcome that
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image. the firststep is to remove physical tackling. >>dajrant: in french many people are scared of rugby, they think it's rough lots of collisions especially amongst the forwards. well, there is none of that. this is an intelligent game where you try and swerve past your opponent, using all the space available and playing as a team. it's played veryrapidly and there is absolutely no danger. >>reporter: to try and underline that rugby is a safe game when played correctly, this new scrum machine was shown off to beach goers. the idea is to demystify what the scrum is really like. but the machine designed for the all-blacks in new zealand will serve another purpose - try and get future french players to be as powerful and agile as their counterparts in the southern hemisphere. >>solva: in french: i think this is very interesting work that we are doing today and we will see the benefits in a few years time. this is
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a tool for today's young players that that will show its usefulness down the road. >>reporter: three years ago france hosted the rugby world cup but it was a missed opportunity. the national side lost its opening game -made the semis by the skin of their teeth before being soundly knocked out. excitement about the sport fizzled out. it also remains too concentrated in the south west of france. the sad fact is most of the people on this beach have never even touched a rugby ballbefore. >>dullin: in french: there are lot of people on the beaches in summer and we have to go and see them in order to grow. we hope they catch the rugby virus here and take it home with them. at least that is what we hope will happen. >>reporter: of course playing with a rugby ball on warm sand is very different from running on to amuddy pitch in the middle of winter. once holiday makers head home organizers of this tour will really discover if they have found a new generation of players or whether this game was just a fun distraction from making
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sandcastles. >> abirached: that's it for this week's world business. thanks for watching. we'll see you again at the same time next week.
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